BOK: Semiconductor Bonuses Fuel Spending on Homes in Dongtan and Teslas

The Bank of Korea (BOK) has projected that increased performance bonuses at Samsung Electronics and SK Hynix could boost next year's real gross domestic product (GDP) growth rate by up to nearly 0.1 percentage points through heightened consumption.

In a report released today titled "How Will Consumption Fare in Semiconductor-Benefited Regions?", the BOK stated, "The semiconductor industry boom is already having a meaningful, positive impact on domestic consumption, and as the scale of future bonus payouts grows, the ripple effect through consumption channels will expand further."

To assess whether consumption is actually increasing due to the semiconductor boom, the BOK analyzed card spending in so-called "semiconductor-benefited regions": Giheung-gu in Yongin, Hwaseong, and Pyeongtaek in Gyeonggi Province, where Samsung Electronics operates, and Icheon in Gyeonggi Province and Heungdeok-gu in Cheongju, North Chungcheong Province, home to SK Hynix.

The findings showed that following bonus payouts in January of last year, monthly consumption in these areas was estimated to be up to about 4 percent higher than in other regions.

The cumulative increase in consumption from last year through June of this year was approximately 1.1 trillion won, and is projected to reach about 1.7 trillion won by the end of this year if current trends persist.

This surge in consumption was calculated to have lifted GDP by 0.01 percent last year and 0.03 percent this year, compared to a scenario without the semiconductor boom.

Furthermore, considering the significant expected expansion in bonus payouts by Samsung Electronics and SK Hynix next year, the BOK analyzed that GDP will increase by 0.08 to 0.12 percent, subsequently pushing the GDP growth rate up by an additional 0.06 to 0.09 percentage points.

The BOK reflected this analysis in its revised economic outlook released on the 27th, upgrading this year's and next year's growth forecasts to 3.3 percent and 2.9 percent, respectively.

The BOK explained that the magnitude of the semiconductor boom's ripple effect on consumption going forward will depend on factors such as whether employment increases in tandem, the extent to which additional income flows into consumption rather than asset markets, and the spread of consumption across various categories.

Notably, the central bank highlighted that the consumption boost was greater when a smaller proportion of performance bonuses was used to purchase housing.

Comparing Icheon and Cheongju, where SK Hynix operates, the increase in consumption resulting from bonus payouts was more pronounced in Cheongju, where a higher proportion of additional income flowed into consumption rather than the housing market.

Existing residents of Icheon substantially increased their purchases of real estate in areas such as Dongtan, Yongin, Suwon, Seongnam, and Hanam after receiving bonuses.

In contrast, residents of Cheongju largely remained within the Daejeon and Chungcheong regions.

Lee Ho-jae, deputy head of the BOK's Research Planning Team, said, "It is estimated that because Icheon is closer to the capital area than Cheongju and allows for commuting from the capital region, related housing purchases were larger."

He also emphasized, "We must create conditions where increased income can smoothly flow back into consumption and the real economy rather than asset markets."

Additionally, looking at past cases in shipbuilding, steel, automobiles, and chemicals, the ripple effect on consumption was greater when total wages increased through employment expansion rather than through a rise in per capita wages for existing workers.

Up to now, the increase in consumption in semiconductor-benefited regions has been skewed toward high-priced discretionary goods such as automobiles and department store items.

For example, the average monthly growth rate of Tesla vehicle deliveries in these regions from January to June of this year reached 105.6 percent year-on-year, significantly outperforming the national average (77.2 percent).

However, the BOK forecasts that if consumption spreads with a time lag to diverse categories such as services, the virtuous cycle of "income to consumption to income" could gradually strengthen.

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.